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WASHINGTON STATE INSURANCE LAWS AND RULES
Table of Contents
WASHINGTON LAWS AND RULES
Common to Life, Disability, Property and Casualty Insurance
I. Terms and Concepts of Insurance…............................................................................................Page 3
A. Insurance: Risk, Insurance Transaction, Insured, Insurer, Insurance Policy, Person
48.01.050, 060 & 070. 48.09.110, .120 .300
II. Insurance Commissioner…..................................................................................................................5
48.01.010, .020, .030, .040, .053, .060, .070, .080, .150, 190, .250, 48.02.010, .020, .060, .080, .100, .160, 48.17.530, .560,
A. Authority, Duties, Powers, Enforcement
B. Rate and Form Filings
C. Examinations: Insurers' Financial Status
D. Hearings, Administrative Law Judge
E. Public Access to Records
F. Unlicensed Activities (Acting Without a License)
48.17.530-560
48.18.080, 48.19.010, .040, 48.17.490
48.03.010-.020, 284-03-005, 015,030
48.04.010-.040
284-03-010
48.17.063, .560
III. Insurers (Insurance Companies).......................................................................................................8
A. Definitions and Types of Insurers:
1. Classification: Domestic, Foreign and Alien
48.05.010, 110, .120
2. Stock
3. Mutual
48.30.100, 48.09.300
4. Fraternal Benefit Society
48.36.A.010
5. Discrimination
48.14.480, 284-30-512, 48.30.300
6. Certificate of Authority; Authorized vs. Unauthorized (Surplus Lines Broker)
Burden of Determining If an Insurer is Authorized
48.15, .020, .040, 48.05.215,48.05.030, 48.17.067
7. Advertising 48.30.040, .080
B. Washington Guaranty Associations ... 48.32A .015-085, 48.32.010, .020, 030, .060(1Ai)…...10
IV. Licensing: Producers, Adjusters ...................................................................................................11
A. Pre-Licensing Requirements
B. Producers
1. Agents
2. Brokers; Bond Needed
3. Brokers vs. Agents
4. Charges for Extra Services
5. Compensation & Disclosure
6. Premium Accountability
48.17.010, .060, .090
48.17.010, 48.17.420, 284-17-015
48.30.157, 48.17.270
48.17.270 .490, 284-30-750
48.17.480
D. General Rules That Apply to Producers …………….....……….…………………………........................…14
1. Written Response to the Commissioner
48.17.475
2. Policy Delivery
284-30-580
3. Transaction Records Kept For 5 Years
284-12-080
4. Separate (Trust) Account; Deposits/Withdrawals; Penalty For Non Compliance 48.17.600
5. Place of Business
48.17.450
6. Agent Appointments and Termination of Appointments
284-17-429-483, 284-12-080, 284-17-473 48.17.160
7. Variable Life and Variable Annuity Licenses
284-17-015
8. Limited Lines License
48.17.170
Produced & Published by Slater Insurance School
E. Obtaining and Renewing Licenses……….…………48.17.060, .060…….……….……....…......Page 16
1. Non-Resident Producer’s License
48.17.173, 284-17-122
2. Temporary License; 180 Days and Legal Representative 48.17.510
3. Renewal of Producer’s License
 Times, First Renewal and Fees
284-17-423, 48.14.010
 Continuing Education Requirements
284-17-200 thru -256
 Maintenance or Retention of Certificates
4. Late Renewal and Reinstatement
284-17-490, 48.17.170
F. Adjusters..………………………………………48.17.010, 390, 410, 420 ......………..…………...…...20
G. Licensing and Examination Exemptions 48.17.010, 062, 110, 48.01.010, 062 .......................21
V. Unfair Trade Practices………........................................... 48.30.010-.330……..……......….........22
Unfair Marketing and Claims Practices........... 284-30-300-380, 400, 570-590, 660, 670
Public Interest
48.01.030
A. Penalties for Non-Compliance
48.17.530-.560, 48.30.010
Suspension: One year max.
48.17.530, .540, .550
Revocation: Immediate, 15 Days Notice, 3 Day Emergency Action
Fines
48.17.560
Licensee's Right to Appeal
B. Illegal Dealings in Premium
48.30.140, .190
C. Premium Receipts
284-30-550
D Illegal Inducement
48.30.150
E. Illegal Rebating
48.30.140, 190
F. Misrepresentation: Twisting
48.30.090, .180, .210, 284-30-350
G. Defamation
48.30.080
H. Illegal Dealings in Commission
48.17.490
I. Violation of Advertising Laws
48.30.040, .050, .060, .070, .080
J. Unfair Claims Settlement Practices
284-30.300 - .750, 48.30.010, .015
K. Time Limit to Pay Benefits (365 days)
284.30.620
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VI. Washington Laws and Rules Relating to Disability Insurance (Effective March 2013)
A. Marketing Methods and Practices……………………………………………………………….………..…...Page 26
Miscellaneous Definitions and Regulations - March 2013:
Definition of Developmental Disability
Eligibility for Coverage of Benefits
Enrollment of Children Under Parents Plan
Health Benefit Plan - Carrier – Clarification
Issuer, Certificate
SHIBA... Statewide Health Insurance Benefits Advisors
48.01.035
48.01.230
48.01.235
48.01.260
284-02-010
1. An Outline of Coverage …………………………………………284-50-410 thru -440............................27
Disability Income Protection Coverage
284-50-410
Accident Only Coverage, Specified Disease and Limited Benefit Coverage 284-50-415, 420, 425
Requirement of Replacement and Disclosure
284-50-430, 440
2. Washington Medicare Supplement Health Insurance Act (Purpose and Scope)....................................29
284-66-010,020,030,040,064 (4a, 4b), 080,110,120, 130, 135 142, 170, 310, 330, 340, 350,





3.
4.
5.
6.
Pre-Existing Conditions; Open Enrollment
A Beneficiary May Not Have Two Medigap Policies at Once
A Licensee or Representative May Not
Guaranteed Renewable - 31-Day Grace Period - Free-Look Period- Guarantee Issue
Medicare Buyer’s Guide and Outline of Coverage
Long-Term Care Insurance: Education Requirement and Definitions ......48.83.130……….........…..….....30
Health Claims False Claims Act....Class C Felony
48.80.010, 020, 030...................................32
Application Completion
284-30-630
Policy Delivery
284-30-580,48.18.260
B. (Washington) Health Insurance Reform …......................48.03.001……………….……….......…..............33
Definitions and Definition of Small Group
Health Reform Requirements:
1. Individual Health Plans - Preexisting Conditions Exclusion
2. Group Health Plans - Preexisting Conditions Exclusion
3. Individual Health Plans - Mandatory Benefits
4. Standard Questionnaire Requirement
5. Maternity Services
6. Patient Bill of Rights
48.43.005
48.43.012
48.43.015
48.43.041
48.43.018
48.43.115 3A 3F
48.43.500-.550
C. Policy Clauses and Provisions: Minimum Standards ...........................48.20.460………........…........36
1.
2.
3.
4.
Proof of Notice: Cancellation, Nonrenewal and Renewal
Free Look
Nonrenewal and Cancellation of Disability Insurance Contracts
Cancellation of Coverage
D. Health Care Services and Health Maintenance Organizations (HMOs) .....................................39
1.
2.
3.
4.
5.
Grievance Process
Definitions
Chemical Dependency
Continuation or Conversion of Benefits
Coverage of Newborns
48.43.535
48.44.00, 48.46.440-460
48.44.240, 245, 48.46.350, 355, 284-53-005, 010
48.44.360-380, 48.46.440-460
48.46.250
E. Health Insurance Coverage Access Act (Washington Health Pool) - Eligibility.......................40


48.41.020, 100, 110, 120, 130, 150
Reimbursement Contract; Major Medical; 80-20% Co-Insurance/Deductibles
Medicare Supplement (Persons Receiving Medicare Parts A and B)
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WASHINGTON STATE LAWS AND RULES
Washington Administrative Code (WAC) Title 284
Revised Code of Washington (RCW) Title 48
3.13
I. Terms and Concepts
A. Insurance is a social device for transferring risk (specifically the financial impact of a loss)
to an insurance company. The funds to cover losses are raised by collecting small amounts
of money (premiums) from a broad base and a large number of people.
“Insurance is a contract whereby one undertakes to indemnify another or pay a specified
amount upon determinable contingencies.”
 Risk is the uncertainty as to the outcome of an event when two or more possibilities
exist. Only pure risk is insurable (the chance of a loss, no gain). With a speculative
risk, there is a chance of gain as well as a chance of loss, therefore, a speculative risk is
not insurable.
 A hazard is anything that increases the chance of a loss, i.e., a swimming pool, being
overweight, old wiring, sky diving, bad driving record or smoking.
 Insurance transactions include:
 Solicitation - offering to sell insurance
 Negotiation - quoting, selling and any analysis prior to execution
 Execution - putting the policy in force, signing any documents, etc.
 Transactions after the sale such as adding or changing coverage, etc.
 Any act of insuring - individuals or companies who perform transactions must
be licensed to do so
 Insurer is the insurance company or other entity assuming risks and agreeing to pay
claims or provide services, including a health care service contractor and health
maintenance organization.

Written communications from insurance companies must be phrased in simple
language and list the full name of the insurer and location of its home office or
principal office, if any, in the United States.
 Insured is the person, persons, or business covered by the insurance who (usually) pays
the premiums in exchange for protection against losses.
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 Insurance Policy is a legal contract which establishes the terms of the agreement
between the insurance company (insurer) and the insured. The insured is the first party
to the contract and the insurance company is the second party to the contract.
 Insurance Producer means a person required to be licensed under the laws of this state
to sell, solicit or negotiate insurance. The term, insurance producer, does not include
title insurance agents or surplus lines brokers.

Person means any individual, company, insurer, association, organization,
reciprocal exchange, partnership, business trust, or corporation.

Business Entity means a corporation, association, partnership, limited liability
company, or other legal entity. AYZ Insurance Agency or Vern Fonk Insurance
Agency are considered business entities, however, Pemco and Safeco are
insurance companies and are not considered business entities under this rule.
A business entity acting as an insurance producer is required to obtain a
producer license. The business must designate a licensed insurance producer
responsible for the business' compliance with the insurance laws and rules of this
state.

Negotiate means the act of conferring directly with, or offering advice directly
to, a purchaser or prospective purchaser of a particular contract of insurance
concerning any of the benefits, terms or conditions of the contract, provided
that the person engaged in that act either sells insurance or obtains insurance
from insurers for purchasers.

Sell means to exchange a contract of insurance by any means, for money or its
equivalent, on behalf of an insurer.

Solicit means attempting to sell insurance, or asking or urging a person to apply
for a particular kind of insurance from a particular insurer.
B. Public Interest……The business of insurance is affected by public interest which requires that
all persons act honestly, fairly, and abstain from deception in insurance matters. All parties
are responsible for the integrity and trustworthiness of the insurance transaction.
Producers must always act in the public’s best interest (acting in the Utmost of Good
Faith).
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II. THE INSURANCE COMMISSIONER
The Insurance Industry in Washington is regulated by the State of Washington. The Revised
Code of Washington (RCWs) is comprised of State Laws (a.k.a. Statute Law) passed by the state
legislature which governs the insurance activities in our state.
The National Association of Insurance Commissioners (NAIC) is the oldest
association of state government officials. The primary responsibility of the
Insurance Commissioner is to protect the interests of the insurance consumer.
A. The Commissioner is elected every four (4) years by the voters of the State
of Washington. The Commissioner must supply a $25,000 Surety Bond
conditioned upon the faithful performance of the duties of his office, and
also may require any of his deputies or employees to post the same bond.
Washington State's current Commissioner is Mike Kreidler.
1. General Powers and Duties of the Commissioner:
 Administer and enforce the provisions of the Insurance Code.
 Make reasonable rules and regulations for effectuating any provision of the
Insurance Code.
 Conduct investigations to determine whether any person or company has violated
any provision of the Insurance Code. The Commissioner may investigate grievances
filed against any authorized insurance company (provider) or insurance producer.
 Take action against an insurance company or health care service contractor by
revocation or suspension of its Certificate of Authority. A certificate of authority is
a company’s license to transact insurance in our state.
 Revoke or suspend any insurance license. Any person violating any provision of the
insurance code is guilty of a gross misdemeanor and will, upon conviction, be fined
not less than ten dollars nor more than one thousand dollars, or imprisoned for not
more than one year, or both.
2. Enforcement by the Commissioner:
 If the Commissioner believes any person is violating or is about to violate insurance
law, he may issue a cease and desist order to a producer or company or bring an
action in court to enjoin the person from continuing the violation.
 If the Commissioner believes any person has violated any penal provision of the
Insurance Code or other insurance laws, he must certify the facts of the violation to
the public prosecutor of the jurisdiction in which the offense was committed.
 The attorney general and prosecuting attorneys in Washington State will prosecute
or defend all proceedings brought under this Code when requested by the
Commissioner.
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3. The Commissioner DOES NOT:
 Put insurance policies together.
 Restrict the number of insurance agents a company may have.
 Make the code or decide on the constitutionality of the codes (statutes).
 Endorse any insurance company.
 Prosecute, arrest, sue or issue warrants against licensees.
4. The Commissioner DOES :
 Obtain and publish for the use of courts and appraisers throughout the state, tables
showing the average expectancy of life and values of annuities.
 Disseminate information concerning the insurance laws of this state.
 Provide assistance to members of the public in obtaining information about
insurance products and in resolving complaints involving insurers and other
licensees.
B. Rates and Forms……Washington is a prior approval state. Every insurer must file with the
Insurance Commissioner, before using, every policy, manual, form, rule, rate, and effective
date, utilized in classifications. The insurer must also stipulate why the classifications,
premiums, rules, etc., are needed.

The Insurance Commissioner is responsible for the regulation of rates and forms.
The Commissioner’s approval of a form may be withdrawn at any time and may
order that the form no longer be used.
C. Examinations…..The Commissioner must establish the Examinations Department headed by
a Chief Examiner who has the responsibility for monitoring the insurers' financial status.

The Chief Examiner must examine each insurance company holding a certificate of
authority at least every five years but may examine at any time, and also has the
responsibility for licensing applicants and checking their qualifications.
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D. Hearings…Administrative Law Judge...Appeals...The Commissioner must hold hearings if
required by any provision of the court or for any purpose within the scope of this code and
must hold a hearing upon written demand by any person.

The Commissioner must grant a 15 working days notice to licensees prior to holding
any hearing.

This 15 working days gives the licensee a chance to get all his/her paperwork in
order and to seek legal representation, if necessary. If requested by the licensee,
an attorney may accompany the licensee to the hearing.

In some cases, under the insurance law, the hearing must be presided over by an
administrative law judge. If not required by law, a licensee may request that a
hearing be presided over by an administrative law judge. Such a judge does not sit
as a law judge, and the power is essentially one of recommendation.

If a hearing is demanded by a licensee, the Commissioner must hold a hearing
within 30 days after receipt of the demand or 30 days after the license suspension.

A licensee may appeal any decision, hearing, order, demand for a hearing,
suspension or revocation of the licensee's license within 90 days from the action.
E. Unlicensed Activities & Penalties....“A person may not act as or hold himself or herself out to
be a producer in this state unless licensed by the Commissioner. A person may not solicit or
take applications for, or procure or place for others, any kind of insurance for which he or she
is not then licensed.”
An “act ” is committed in this state if it is committed, in whole or in part, in the state of
Washington, or affects persons or property within the state and relates to or involves any
insurance contract.
 Any person who knowingly violates this section is guilty of a Class B felony. For
example, if a producer licensed to sell only life insurance sells an individual a disability
income policy, he or she could be charged with a felony.
 The Commissioner may issue a cease and desist order, suspend or revoke a license
and/or assess a civil penalty of not more than $25,000 for each violation.
Fines collected by the Commissioner must be paid to the State Treasurer for deposit in
the general fund.
 Upon failure to pay a civil penalty in not less than 15 days nor more than 30 days,
the attorney general may bring a civil action on behalf of the Insurance Commissioner.
F. Public Access to Records……The Insurance Commissioner must allow public access to
records by appointing a Public Records Officer. The Officer must be located in the
Commissioner's Office and will be responsible for implementing the laws. The Officer must
help individuals by accepting written requests for information, helping obtain the
appropriate description of the records, and assisting the public.
7
III. INSURERS (Insurance Companies).....An insurer is a company that takes on the
responsibility of transferring risk from the general public to itself through insurance contracts.
A. Definitions
1. Classifications of Insurance Companies:

A Domestic company is an insurer formed under the laws of the State of Washington
(a.k.a. domiciled). Examples are Safeco and Pemco.

A Foreign company is formed in the United States other than in the State of
Washington. Examples include Farmers, State Farm and Aflac. These companies
need three years of insurance experience before being “authorized” in our State.

An Alien company is formed under the laws of a nation other than the United States.
An example is Sun Life of Canada. These companies need three years of insurance
industry experience before being “authorized” in our State.
2. A Stock Insurance Company is an incorporated business organization organized as a
profit making entity and is owned by the stockholders. Dividends are paid to the
stockholders.
3. A Mutual Insurance Company is owned by the policy owners (there are no
stockholders.) Policy owners (a.k.a. members) vote for a board of directors which directs
the affairs of the company. The board of directors elects how much of a dividend (profit)
to pay to the policy owners. Guaranteeing dividends is a form of illegal rebating.
4. A Fraternal, or Fraternal Benefit Society, is an incorporated society or order which is a
nonprofit organization that operates on the basis of “lodge,” with a representative form
of government. It is formed solely for the benefit of its members. It issues assessable
(premiums may go up) and par policies (pays dividends). They sell only life and disability
insurance. Examples include Knights of Columbus and Thrivent for Lutherans.
5. Unfair Discrimination....It is illegal to unfairly discriminate.
A person or entity engaged in the business of insurance in this state may NOT refuse to
issue any contract of insurance or cancel or decline to renew such contract, or restrict
the amount of insurance benefits payable, on any term, rate, condition, or type of
coverage, because of the sex, marital status, sexual orientation, or the presence of any
sensory, mental, or physical handicap of the insured or prospective insured.
This section of the insurance code does not prohibit fair discrimination when
bona fide statistical differences in risk or exposure have been substantiated.

For example, a 16 year old driver is a statistically higher-risk than a 45 year old
driver. Because there is valid evidence to show this increase in risk, the 16 year old
driver will pay a higher premium for auto insurance.
8
6. A Certificate of Authority is issued by the Commissioner and authorizes a company to
sell insurance in our state.
A Certificate of Authority must specify:
a) the name of the insurance company
b) the location of its principal office
c) the kind of insurance it is authorized to transact in this state
d) the powers that an insurer grants to its producers
Once an insurance company receives a Certificate of Authority, they are known as an
“admitted” insurer to the state of Washington.
A Certificate of Authority renews annually on July 1st. Don’t get this confused with a
producer’s license which renews every two years on the producer’s birthday.
“An unauthorized insurance company may not transact business in the State of
Washington. No producer may represent an unauthorized insurer. Each violation is
punishable by a $25,000 fine.”
 Exception: If certain insurance coverage cannot be obtained from authorized insurers,
such coverage, which is known as surplus lines, may be obtained through a surplus lines
broker.
The Commissioner may order replacement of policies improperly placed with
an unauthorized insurer with policies issued by an authorized insurer.
The burden of determining....Whether a prospective insurer is authorized to transact
business in our state is the responsibility of the producer who is soliciting, negotiating or
procuring an application for the insurance. The producer selling the insurance must make a
good faith effort to determine whether the entity that is issuing the coverage is
“authorized” in Washington State.
7. Advertising.....No person may knowingly make, publish, or disseminate any false,
deceptive or misleading representation or advertising in the conduct of the business of
insurance, or relative to the business of insurance.
Every advertisement on behalf of an insurer must set forth the name in full of the insurer and
the location of its home office or principal office, if any, in the United States (if an alien insurer).
No person who is not an insurer may assume or use any name which deceptively infers or
suggests that it is an insurer.
Advertising Financial Condition: Every advertisement on behalf of any insurer that shows its
financial condition may be in a condensed form but must correspond with the insurer's last
verified statement filed with the Commissioner. No insurer or person may advertise assets
except those actually owned and possessed by the insurer.
9
B. Washington Insurance Guaranty Association (Property and Casualty)
&
Washington Life and Disability Insurance Guaranty Association
The purpose of the Guaranty Association is the creation of funds arising from a premium tax
assessment on all insurers authorized to transact insurance business in Washington State.
The funds are used to assure claim payments, should the insurer become insolvent.
The operation of a Guaranty Association is strictly controlled by statute. When an insurer is
placed into liquidation due to insolvency, claims for policy benefits and claims for the return
of unearned premiums are referred directly to the Guaranty Association for payment.
Life and disability insurance policies are usually kept in force because age and insurability
make replacing the coverage very expensive or even impossible. For these policies, the
Guaranty Associations of the various states involved work together to find a buyer for the
business and transfer the obligations to a solvent insurer.

Coverage limit is $300,000 per claim for Property & Casualty ($100 deductible).

Coverage limit is $500,000 per person for Life & Disability ($100 deductible).

The payment of a claim will not exceed the limit of the policy from which the claim
arises.

It is run by the Commissioner and five to nine other officials who are elected by the
insurance companies who pay the tax.
 No Duplication of Benefits: Whenever a payment of proceeds or benefits by the
Association is also provided for under a similar law or insurance policy, the Washington
Association will act as secondary coverage.
 The Associations do not guarantee: fraternal benefit societies, health maintenance
organizations, health care service contractors, surplus lines or reinsurance business,
variable contracts, title insurance, workers' compensation, ocean marine and surety
(bonds).
 Licensees and insurers may not advertise or mention this Association to the public (for
the purpose of solicitation, sale or inducement of insurance).
10
IV. LICENSING: PRODUCERS & ADJUSTERS
Insurance Producer means a person required to be licensed under the laws of this state to
sell, solicit or negotiate insurance. The term, insurance producer, does not include title
insurance agents or surplus lines brokers.
A. Pre-licensing…...Prior to transacting insurance, an applicant for a resident insurance
producer’s license must:
o take and pass the required examination for each line of authority to be applied for
o submit an application form with the required attachments and fees
o receive a license from the Commissioner
o be appointed/affiliated with a company
As a prerequisite for admission to the examination, an applicant for a resident insurance
producer license for personal lines, life, disability, property or casualty lines of authority
must complete 20 hours of pre-licensing insurance education for each major line of
authority for which the applicant will be tested. Each course must include training on
Washington insurance laws and rules applicable to that line of authority and general laws.
The prescribed curriculum for each line of authority must be successfully completed within
the twelve-month period immediately preceding the examination.
1. To be a producer, an individual must:
 be at least 18 years of age and reside in the State of Washington

have not committed any act that is grounds for denial, suspension, or revocation

have completed a pre-licensing course of study for the lines of authority for which the
person has applied

have paid the appropriate fees, and

have passed the exams for the lines of authority for which the person has applied
2. A business acting as an insurance producer is required to obtain a producer license. The
business must designate a licensed insurance producer responsible for the business' compliance
with the insurance laws and rules of this state.
3. A producer of insurance does not need to be a citizen of the United States. However,
a non-citizen must have a social security number to become licensed.
4. A producer may receive a license in one or more lines of authority: life, disability,
property, casualty, variable life and variable annuity products, personal lines and limited
lines insurance products.
11
B. Producers.... a Producer can be an Agent or Broker, or both:
1. An Agent is a producer who is appointed by an insurance company to solicit applications for
insurance on its behalf, and when authorized to do so, collect premiums for the insurance
policy, and essentially effectuate (put into effect) the insurance coverage. An agent can be
an individual, partnership or corporation. An agent may be given binding authority and
represents the insurance company with which he is appointed at all times.

No bond is required for a producer who acts as an agent because the agent is a legal
extension of the insurance company with which he is appointed.
2. A Broker is a producer licensed to represent the insured (consumer) and find the best
(authorized) company and insurance for the insured in the State of Washington.

A bond for those producers acting in a broker or surplus lines broker capacity must be
in place before writing any business. The bond amount is $2,500 or five percent of the
premiums brokered in the previous calendar year, whichever is greater, not to exceed
the penal amount of $100,000, in favor of the people of the State of Washington.
3. Broker vs. Agent
 A broker needs to be bonded; an agent does not.

To sell insurance for a particular insurance company, an agent needs to be appointed by
that company; a broker does not.

A broker does not have binding authority; a property and casualty agent does have
binding authority which is given to him from the company for which he sells.

A broker may take applications for insurance and collect premiums without being
appointed by the insurer; an agent may not.

A broker represents the consumer; an agent represents the insurance company.

A producer may not act as a broker and an agent for the same insurance company.
4. Charges for Extra Services....A producer may be permitted to enter into reasonable
arrangements with any person to charge a fee, but only with the prior written consent of
the state commissioner.
 This may be allowed in situations where services beyond the scope of services
customarily provided in connection with the solicitation and procurement of insurance
are provided.
 The charge or fee to the individual or insured must be reasonable, taking into account
receipt of commissions and their relation to the value of the total work performed.
 The person must be given written notice in advance of what the fixed charge will be,
or the basis for determining the charge.
12
5. Compensation: Unless the agency-insurer agreement provides to the contrary, an
insurance producer may receive the following compensation:

A commission paid by the insurer

A fee paid by the insured

A combination of commission paid by the insurer and a fee paid by the
insured
If the compensation received by an insurance producer who is dealing with the insured
includes a fee, the insurance producer must disclose in writing to the insured for each policy:

The full amount of the fee paid by the insured

The full amount of any commission paid to the producer

The full name of the insurance company that paid the commission

An explanation of any offset or reimbursement of fees or commissions
 Written disclosure of compensation must be provided by the producer to the
insured prior to the sale of the policy. Written disclosure as required by this section
must be signed by the insurance producer and the insured, and the writing must be
retained by the insurance producer for five years.
 In the case of a purchase over the telephone or by electronic means for which
written consent cannot be reasonably obtained, consent documented by the
producer will be acceptable.
6. Premium Accountability....An insurance producer or any other representative of an
insurer involved in procuring an insurance contract must report to the insurer the exact amount
of consideration charged as premium for such contract. The amount collected must be shown
in the contract and in the records of the insurance producer. Each willful violation of this
provision is a misdemeanor.
Fiduciary refers to a person holding the funds of another in a position of trust.
a) All funds representing premiums or return premiums received by an insurance
producer and must be promptly accounted for and paid to the person or company who
is entitled to the funds.
b) Any person licensed who receives funds which belong to or should be paid to another
person as a result of an insurance transaction is deemed to have received the funds in a
fiduciary capacity. The licensee must promptly account for and pay the funds to the
person entitled to the funds.
c) Any insurance producer or other licensed representative who diverts or
appropriates any funds received in a fiduciary capacity is guilty of theft by
embezzlement (a.k.a. larceny) and is subject to criminal penalty.
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D. General Requirements - Producers
1. A producer must respond to any inquiries from the Commissioner's office promptly and it
must be in writing. Promptly means within 15 business days from receipt of the inquiry.

“Sending written notice” means transmitting the required information in writing on
forms designated by the Commissioner via mail, commercial delivery company,
electronic telefacsimile transmission or e-mail.
2. A producer must make actual physical delivery (mailing is acceptable) of a policy within a
reasonable period of time after its issuance. Insurance companies are held responsible for
any delay resulting from the failure of their producers to act diligently.

The producer may not obtain a receipt indicating a delivery and then retain the policy
in his/her possession. A producer may secure the insured's policy for servicing or
analysis, but must give a policy receipt and return the policy promptly.
3. Illegal Dealings in Premiums….. “No person may willfully collect any sum as premium for
insurance, which insurance is not then provided. No person may willfully or knowingly fail to
return to the person entitled thereto within a reasonable length of time any sum collected as
premium for insurance in excess of the amount actually expended for insurance applicable to
the subject on account of which the premium was collected.”

Each violation which does not amount to a felony constitutes a misdemeanor.
4. Producers, title insurance agents, and adjusters must keep records of all insurance
transactions at the licensee’s business address for five years. This section of the law does
not apply to life or disability insurance (because of the confidential treatment of the
applicant’s health information).

The Insurance Company must keep transaction records for three years.
5. Separate Account.... All funds representing premiums and return premiums received by a
producer must be promptly deposited in a separate account (a.k.a. Trust account). The
account may be interest bearing.
The Separate (Trust) Account Funds may be deposited in a checking or savings account
located in the State. A business entity may utilize one separate account for use by all of its
affiliated persons.
A producer may not deposit any funds, other than premium and return premium funds,
into the separate account, with the following exceptions…
A producer may:
 Deposit funds needed to pay bank charges due to the operation of the account.
 Deposit funds for the purpose of having a reserve in the separate account to
be able to advance premium or return premium funds to customers.
 Combine Washington State premiums with premiums produced in other States.
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Withdrawals from a separate account may be done for the following reasons:
 For bank charges for the operation of the separate account.
 For payment of premiums to the insurer or to pay commissions to another
producer.
 For payment of return premiums, and it must go directly to the insured.
 For the transfer of fiduciary (confidential) funds to go directly to another
account. "Fiduciary" refers to a person holding the funds of another in a
position of trust.

Willful violation of this “separate account” regulation is a misdemeanor.
6. Place of Business.... A producer’s office must be accessible (open) to the public. This law
does not apply for a producer who works out of his home, nor does it apply for life only or
disability only producers.

A licensee whose personal residence is shown on his license may obscure his residence
address as long as the licensee’s name can be seen clearly by the public.

A producer must display his license in a conspicuous place at his place of business.

A producer must advise the Commissioner's Office of any change in residence, mailing,
business or e-mail address within 30 days.

A producer must keep all his records, certificates and licenses at his place of business.

A producer maintaining more than one place of business in this state must obtain a
duplicate license for each additional place, and pay the full fee.
7. Appointments/Terminations.... A producer acting as an agent must be appointed by an
authorized insurer before he can sell for that insurer.
a) An insurance producer may be appointed or affiliated by submitting electronically the
notice of appointment or affiliation through a third-party on-line licensing provider or the
commissioner's on-line services, available at www.insurance.wa.gov.
b) Insurance producers must be authorized to transact at least one line of authority within
the authority of the insurer or the business entity.
c) Each appointment or affiliation is continuous until the first of the following occurs: the
producer's license is revoked, terminated, or non-renewed; or a notice of termination of the
appointment is electronically submitted to the commissioner; or the appointment or
affiliation renewal fee of $20.00 is not paid.
d) The insurer and business entities are obligated to ensure that appointed insurance
producers are licensed for the proper line of authority for which the insurance producer
submits an application.
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e) The applicable initial and renewal appointment and affiliation fees must be paid at the
time of appointment, affiliation, or their renewals. Appointments renew every two (2)
years on a date set by the Commissioner.

At least sixty days prior to the renewal date, an appointment or affiliation renewal
notice will be sent to the insurer or business entity via e-mail.

An appointment with a company such as Farmers Insurance Group allows a producer
to sell for all of its subsidiaries. Only one appointment will be needed!

If a producer is appointed by only one company or insurer, he is called a captive or
exclusive agent. A captive agent does not own his accounts and renewals.

If a producer is appointed by more than one company, he is called an independent
agent. An independent agent owns a right to his accounts and renewals.
f) An insurer may terminate an appointment by sending notice of termination to the
Commissioner and the producer. If an insurer terminates the appointment “for cause,”
the insurer must electronically notify the Insurance Commissioner within 30 days
following the effective date of the termination. The “cause” for termination must be
stated in the notice.
g) A producer may terminate its appointment by sending advance written notice to the
insurer or business and send a copy via e-mail to the Commissioner.
h) If an insurance producer solicits insurance on behalf of an insurer, but it is later
determined that the insurance producer was not eligible for appointment by the insurer:
1. The insurance contract will be effective and cannot be terminated by the insurer
2. The producer must not receive compensation for any insurance product sold
3. The insurance producer and the insurer may be subject to disciplinary action
i) Affiliation....Individual licensees that represent a business entity must be affiliated with
the licensed business entity. Each business entity must provide the Commissioner with the
names of all individual licensees authorized to represent the business entity by electronic
submission and pay the applicable fees.
If an insurance producer is affiliated with a business entity, the insurance producer is not
required to be directly appointed by the insurer who writes the policy. For example, if a
producer is affiliated with Vern Fonk Insurance, he doesn't need to be appointed by each
insurer with which Vern Fonk does business. The producer only needs to be affiliated with
Vern Fonk. The individual insurance producer's authority to transact insurance is limited to
those lines of authority for which the insurance producer is licensed and that are within the
business entity's lines of authority.
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8. Agent Licensing vs. Agent Appointment:
 A license is the authority granted by the State of Washington to act as an agent.
 An appointment is the authority that you receive from the insurer to act on its behalf.
 You cannot act as an agent for any insurance company without being appointed by that
company and being licensed in the type of insurance transacted.
 Obtaining and maintaining the proper license is your responsibility.
 The renewal of your appointment is the responsibility of the insurer you represent.
9. Variable Life and Variable Annuity Resident Licenses....Resident insurance producers who
desire to sell, solicit or negotiate variable life and variable annuity products in this state
must obtain and maintain a life insurance producer license and an appropriate securities
license from the Financial Industry Regulatory Authority (FINRA) or the Department of
Financial Institutions (DFI). Upon presentation of satisfactory evidence that the producer
has fulfilled this requirement, the Commissioner will issue a license with a variable life and
a variable annuity line of authority.
10. Limited-Lines License....With this license, the producer can sell only one type of product.
No pre-license education or continuing education is required. Limited-licenses include:
 Credit License (must pass the credit exam) includes coverage for Life, Disability,
Property and Casualty…….Credit Life will pay off a loan if the insured dies. Credit
Disability will make the loan payments for the insured should they become disabled.
Credit Property and Casualty is a license for those who sell insurance covering
mortgaged property (such as motor vehicles). This is also known as “collateral
protection coverage” or “vendor single-interest” insurance.
 Surety License…..allows the licensee to sell bonds (must pass the Surety exam).
 Travel License…..issued to travel agents (does not need to pass any exam).
17
E. Obtaining and Renewing Licenses.... In order to obtain a Washington Producers or
Adjusters license, the applicant must: be at least 18 years old; must not have not committed any
act that is grounds for denial, suspension, or revocation of a license; be a resident of Washington State;
must pass the appropriate insurance pre licensing education course study and examination; and
pay the appropriate fees.
1. A person can obtain a Non-Resident Producer’s License if she does not live in Washington.
The licensee must be licensed in her resident state and does not have to pass our State’s
license exam if she has passed a written exam in her current state.

Each licensed nonresident producer appoints the Commissioner as her attorney to
receive service of legal process issued against the producer in this state upon causes of
action arising within this state.

The state of residence must reciprocate (reciprocity) with Washington State in allowing
Washington’s producers and brokers to be nonresident licensees.
2. A Temporary License....can be granted by the Commissioner on an emergency basis for up
to a maximum of 180 days without passing an exam.

A temporary license may be issued to any person legally representing the interests of
the licensed producer that is disabled, deceased, or entering active service in the United
States Armed Forces. A temporary license could be issued for any circumstance for
which the Commissioner feels it necessary to protect the insured and the public.

A temporary license could be a granted to a: spouse, executor, lawyer, employee, or
person with power of attorney.

A temporary license is good for 180 days to give time for the producer to:
a) recover
b) sell the business
c) train and license a new employee to run the agency

A temporary license may not be granted to a new prospective licensee.
3. Renewal of a Producer’s License....To renew a license, a renewal application must be
submitted by the producer and the fee (currently $55) must be paid to the
Commissioner's office by midnight of the licensee's birth date.
Renewals are all done electronically.
a. Late fees apply if the renewal fee is not paid when due:
 1 to 30 days late = an additional 50% surcharge penalty of the license renewal fee.
 31 to 60 days late = an additional 100% surcharge penalty of the license renewal fee.
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 61 days to twelve months late = a 200% surcharge penalty of the license renewal fee.
 After 60 days from the expiration date the license must be reinstated. The
individual must also complete an application for reinstatement and pay
the license fee and surcharge.
 After 60 days from the expiration date, all associated appointments and
affiliations are terminated. This means that the agent will need to secure a
new appointment agreement with any insurance company through which
he wishes to transact business.
 If over one year, the producer will have to begin the entire licensing
process again, including pre-licensing education, re-taking all applicable
licensing exams, new fingerprint card and re-apply with the state.
b. 24 hours of Continuing Education (C.E.).... must be presented as a prerequisite for
the renewal of a producer's license, of which three hours must be in “Ethics.”
 Exceptions: This education requirement does not apply to limited-lines
licensees or to resident adjusters. The continuing education may be waived
for licensees in active military service, but a Letter of Mobilization and the
name and address of the person authorized to act as the licensee’s
representative is required. A medical waiver with a letter from a medical
provider describing the illness may also be issued for one renewal period.
 Retention of Certificates..... A licensee must keep Continuing Education
(C.E.) certificates for three years from the date on the certificate. An
approved C.E. course may be repeated for credit after a period of three years
from the previous completion date.
4. Initial and reinstated individual licenses are valid from their date of issuance until the
date of the licensee's next birthday anniversary plus one year. For example:

If Susie received her initial license on May 1 and her birthday is on June 25, she will
have about 14 months before her first renewal is due (2 months plus 1 year).

If Doug received his initial license on May 1 and his birthday is on March 25, he will
have about 23 months before his first renewal is due (11 months plus 1 year).
The renewal date of a business entity license is based on the date of application. The
license is valid for two years.
New Licenses: License candidates have 180 days to apply for a license after passing
their exam. A new licensee who acts as an agent cannot sell insurance until they have
an appointment or affiliation but there is no time limit to get the appointment or
affiliation. A new licensee who acts as a broker cannot sell insurance until they have a
bond, but there is no time limit for securing the bond.
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F. An Adjuster....is a person who, for compensation, fee or commission, investigates or
reports to a company regarding claims arising under insurance contracts.
1. Licensed/Self-Employed Adjusters must pass an adjuster’s exam and must have
experience or special education or training with reference to the handling of loss claims.

Independent Adjusters are hired by insurance companies to settle claims. They
charge the insurance company for settling the claim, and since they are working for
the insurance company, no bond is required.

Public Adjusters are hired by the insured for claims. They are employed by the
insured and therefore bill the insured for settling the claim. A $5,000 bond is
required. A public adjuster also may be licensed as an independent adjuster but
may not work for an insured and an insurer on the same claim.

Non-Licensed Adjusters……An attorney-at-law who adjusts insurance losses
incidental to the practice of his or her profession, an adjuster of marine losses, or a
salaried employee of an insurer (a.k.a. company adjuster) or of a general
agent/producer is not considered an adjuster, and thus, does not need to be
licensed as an adjuster.

A producer may, from time to time, act as an adjuster without being required to be
licensed as an adjuster, but only with the permission of the insurance company with
which he is doing business.
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G. Licensing & Examination Exemptions.... The Commissioner may make arrangements,
including contracting with an outside testing service, for administering examinations.
The Commissioner may, at any time, require any licensed insurance producer or adjuster to
take and successfully pass an examination testing the licensee's competence and qualifications
as a condition to the continuance or renewal of a license, if the licensee has been guilty of
violating the insurance laws, or has so conducted affairs under an insurance license as to cause
the Commissioner to reasonably desire further evidence of the licensee's qualifications.
1. A license to be an insurance producer or adjuster is NOT REQUIRED of the following:
An officer, director, or employee of an insurer or of an insurance producer, provided that the
officer, director, or employee does not receive any commission on policies written or sold to
insure risks residing, located, or to be performed in this state, and; the officer, director, or
employee's activities are executive, administrative, managerial, clerical, or a combination of
these, and are only indirectly related to the sale, solicitation, or negotiation of insurance; or
The officer, director, or employee's function relates to underwriting, loss control, inspection, or
the processing, adjusting, investigating, or settling of a claim on a contract of insurance; or
A person who secures and furnishes information for group insurance contracts or for the
purpose of enrolling individuals under plans; or issuing certificates under plans or otherwise
assisting in administering plans; where no commission is paid to the person for the service; or
Employees of insurers or organizations employed by insurers who are engaging in the
inspection, rating, or classification of risks, or in the training of insurance producers, and who
are not individually engaged in the sale, solicitation, or negotiation of insurance.
2. The EXAMINATION to be a producer or adjuster is NOT REQUIRED of the following:
Any person who receives a waiver from the Commissioner;
Applicants for an adjuster's license who for a period of one year have been a full-time salaried
employee of an insurer or of a general agent to adjust or investigate insurance contracts;
Applicants for a license as a nonresident adjuster who are duly licensed in another state and
who are deemed by the Commissioner to be fully qualified and competent for a similar license
in this state.
The applicant for a Washington license who has at least two years of licensed experience in
another state in the same lines of insurance and was licensed within the preceding 90 days.
A person who is applying for a non-resident license.
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V. UNFAIR TRADE PRACTICES
The Unfair Trade Practices Act is divided into two parts: Unfair Marketing Practices and Unfair
Claims Practices. Statutes (laws) define and prohibit certain trade and claims practices which
are unfair, misleading and deceptive.
Any person violating any provision of the insurance code could have his or her license
suspended or revoked.
Any person violating any provision of the insurance code is guilty of a gross misdemeanor
and will, upon conviction, be fined not less than ten dollars nor more than one thousand dollars,
or imprisoned for not more than one year, or both.
Public Interest ....The business of insurance is one affected by the public interest, requiring that
all persons act in good faith, abstain from deception, and practice honesty and equity in all
insurance matters. Upon the insurer, the insured, their providers, and their representatives
rests the duty of preserving the integrity of insurance.
A. Penalties for Non-Compliance
1. Suspension……The Commissioner can take away the license temporarily for a maximum of
one year and then it is returned without the producer having to retake an exam.
2. Revocation……The Commissioner can take away the license for a maximum of one year.
The person must reapply for the license but it may not be approved. However, if the
Commissioner does approve the application, pre-license education is required and the
proper license exam must be passed again.

Immediate revocation (without a hearing) of any insurance license is allowed upon the
sentencing of the licensee for conviction of a felony, but only if the facts of the
conviction demonstrate the licensee to be untrustworthy to maintain any such license.

The Commissioner may suspend, revoke or refuse to renew a license with not less than
15-days written notice.

The Commissioner may suspend a license with not less than a three-day written notice
upon finding that the public safety requires this emergency action.
3. The Commissioner can fine a maximum of $1,000 per offense, for a violation of the code
 Fines and penalties must be paid in not less than 15 days nor more than 30 days after
the receipt of the order to pay.

Failure to pay will result in revocation of the insurance license and the fine recovered in a
civil action through the courts on behalf of the Insurance Commissioner.

Fines are paid to the State Treasurer for deposit in the general fund.

There is an exception that allows for a $25,000 civil penalty for anyone acting as a
producer without being properly licensed to do so.
22
4. The licensee has the legal right to appeal fines, penalties, suspensions and revocations
levied by the State Commissioner. The licensee can appeal any decision of the
Commissioner or any deputy, assistant or examiner of the Commissioner.

The licensee has 90 days in which to appeal and ask for a hearing.
B. Illegal Dealings in Premium
o No one can willfully collect money as premium for insurance if insurance coverage
is not provided or the premium for insurance is in excess of the amount actually
due.
o A person must return any overpayment of money collected as premium, in a
reasonable length of time, to the person who paid the premium.
o Each violation of this section which does not amount to a felony constitutes a
misdemeanor.
C. Illegal Inducement....It is unlawful for insurance personnel to provide or promise in a policy
anything valued at more than an aggregate of $25.00 per year to any one prospective or
current policyholder. No producer can induce a prospective or current policyholder to provide
for, offer, buy, sell, give, allow or promise a gift or service that is worth more than $25.00 per
year to any one prospective or current policyholder.
o This is usually about rewards other than money, such as gifts and services.
o Offering any special advisory board contract, agreement or understanding of any
kind is illegal inducement. Paying $26 for an individual’s lunch at the time of
procuring insurance is illegal inducement.
D. Illegal Rebating....It is unlawful for a producer or insurance company to give any valuable
consideration such as a rebate (money back), discount, reduction of premium, etc., to induce
a person to buy insurance.
o Usually deals with the exchange of cash.
o The insured is subject to a $200 fine for accepting a rebate.
o Guaranteeing to pay future dividends is an example of rebating.
E. Violation of Advertising Laws.... A producer may not commit false advertising in regard to
an insurer's financial condition. The producer must not use unfair or deceptive practices in the
sale, advertising or marketing of any type of insurance product.
o All advertising must be clear and understandable and contain the name and address
of the insurance company. This includes mailings and brochures.
23
F. Misrepresentation……Telling a lie or deceiving anyone about any aspect of insurance, such
as false coverage, inflated benefits, unrealistic returns, etc., are all examples.
 Misrepresentation of policies: No person may make or issue any misrepresentation
of the terms of any policy or the benefits or advantages promised, or the dividends
or share of surplus to be received, or use any name or title of any policy or class of
policies misrepresenting the nature of the policy.
 Misrepresentation in application for insurance: A person who knowingly makes a
false or misleading statement or impersonation, or who willfully fails to reveal a
material fact relative to an application for insurance, is guilty of a gross
misdemeanor, and the license of any such person may be revoked.
 Misrepresentation by twisting: No person may, by misrepresentations or
misleading comparisons, induce or tend to induce, any insured to lapse, terminate,
forfeit, surrender, retain, or convert any insurance policy.

For example, this can occur when a producer wants a prospective customer to
cancel and switch his/her current insurance policy over to the producer’s
company, and does so by giving misleading facts.

Another example of twisting is failing to give required replacement forms to an
insured when replacing an existing life policy.
G. Defamation of Insurer....(a form of misrepresentation).... No person may make, publish or
circulate any information or statement which is false or maliciously critical if designed to injure
the reputation or business of any authorized insurance company (insurer).
H. Illegal Dealings In Commission….“A producer of insurance may not compensate any person
other than another producer for procuring applications or placing insurance in this state.”
It is illegal to share commissions with anyone who is not licensed in the same line of
insurance in which the insurance was procured (written). For example, a life-only
producer may not share commissions with a property and casualty producer.
 This does not affect salaries paid to unlicensed persons, as long as the salaries
are not contingent on the volume of business transacted.
I. A signed Premium Receipt for any insurance premiums received by the licensee must be
delivered or mailed no later than the next working day. The receipt must include:
 The date, amount collected and signature of the producer
 Identity of the producer, including the producer’s address
 Name of the insured or by whom the payment was made
 A brief description of coverage for which payment was received
 The insurance company by its full legal name
Special Note: The issued date of the policy (often referred to as the policy inception
date) does NOT have to be on a premium receipt.
24
J. Specific Unfair Claims Settlement Practices:
1. Misrepresenting pertinent facts or insurance policy provisions.
2. Failing to acknowledge and act promptly upon communications regarding a claim.
3. Failing to implement standards for the prompt investigation of claims.
4. Refusing to pay claims without conducting a reasonable investigation.
5. Failing to affirm or deny coverage of claims within a reasonable time.
6. Not attempting in good faith to make a prompt, fair and equitable settlement of claims in
which liability has become clear.
7. Compelling an insured to institute or submit to litigation, arbitration, or appraisal to recover
amounts due under an insurance policy.
8. Settling a claim for less than a reasonable amount a claimant is entitled to receive.
9. Making claims payments not accompanied by a statement setting forth the coverage under
which the payments are being made.
10. Telling an insured or claimants that there is a policy arbitration award for the purpose of
compelling them to accept less than the amount awarded in arbitration.
11. Delaying the payment of claims by requiring a claimant to submit a preliminary claim report
and then requiring subsequent submissions that contain the same information.
12. Failing to promptly settle claims, where liability has become reasonably clear, under one
portion of the policy coverage in order to influence settlements under other insurance policy.
13. Failing to promptly provide a reasonable explanation for denial of a claim.
14. Unfairly discriminating against claimants who are represented by a public adjuster.
15. Failure to expeditiously honor drafts given in settlement of claims.
16. Failure to adopt and implement reasonable standards for the processing and payment of
claims once the obligation to pay has been established.
17. Delaying appraisals through the use of appraisers from outside of the loss area.
18. Failing to make a good faith effort to settle a claim before exercising a right to an appraisal.
19. Negotiating or settling a claim directly with any claimant known to be represented by an
attorney without the attorney’s knowledge and consent.
 Unfair Claims Settlement Practices:
 Insurance companies must acknowledge receipt of notification of a claim
within 10 working days.

When the Commissioner requests information, the insurance company must
respond within 15 working days.

Insurance companies must complete investigation of claims within 30 days after
notification of claim.
 The insurer's claim files are subject to examination by the commissioner. The files
must contain all notes and work papers pertaining to the claim in enough detail that
pertinent events and dates of the events can be reconstructed.
K. Permissible time limit for benefits payable because of accidental injury or death…… It is an
unfair practice not to pay benefits under accidental death or accidental injury policies if the
covered death or injury occurs within one year (365 days) from the date of the accident.
(The industry standard is 90 days).
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VI. Laws Relating to Disability (Accident & Health) Insurance
(13 questions)
Developmental Disability means a disability attributable to intellectual disability, cerebral
palsy, epilepsy, autism, or another neurological condition closely related to an intellectual
disability. The disability must have originated before the individual attains age eighteen, which
disability has continued or can be expected to continue indefinitely, and which constitutes a
substantial limitation to such individual.
Eligibility for Coverage or Payments may not be contingent on eligibility for medical
assistance.... An issuer of insurance coverage, whether group or individual, may not consider
the availability of any social or government medical assistance program available for that
individual in considering his eligibility for coverage or when making payments under its medical
plan.
An Employee Welfare Benefit Plan is generally meant to mean a group plan that supplies
health care benefits to employees.
Enrollment of Children Under the Parents Health Plan.... An issuer may not deny enrollment of
a child under the health plan of the child's parent on the grounds that:
1) the child was born out of wedlock; or
2) is not claimed as a dependent on the parent's federal tax return; or
3) the child does not reside with the parent.

Where a parent is required by a court order to provide health coverage for a child,
the issuer, must permit the parent to enroll the child for the coverage without
regard to any enrollment season restrictions.
Health Benefit Plans - Carrier - Clarification.... A carrier may cease the sale of health benefit
plans to new applicants if the closed plans are closed to all new applicants. Carriers are NOT
required to offer health benefit plans for sale.
"Issuer" includes insurance companies, fraternal benefit societies, health care service
contractors, health maintenance organizations, or other entity delivering or issuing any health
benefit plan or long-term care policy under a group or individual contract.
"Direct response issuer" means an issuer who is transacting insurance directly with a potential
insured without solicitation by, or the intervention of, a licensed insurance producer.
"Certificate" means a document (certificate) delivered or issued showing that coverage is in
effect under a group insurance policy.
"SHIBA".... The Office of the Insurance Commissioner (OIC) offers assistance statewide to
consumers regarding health care insurance through its Statewide Health Insurance Benefits
Advisors (SHIBA) program. Volunteers are trained by OIC employees to provide counseling,
education, and other assistance to residents of Washington. Information about SHIBA can be
found at the following OIC Web site: www.insurance.wa.gov
26
A. Marketing Methods and Practices
1. Outline of Coverage and Disclosure Forms
a) An Outline of Coverage is required to be given on all disability insurance policies
at the time of application and acknowledgement of receipt provided to the insurer. The
Outline of Coverage form must include:

A brief specific description of the benefits contained in this policy. The description of
benefits must be stated clearly and concisely and must include a description of any
deductibles or copayment provisions applicable to the benefits described.

A description of any policy provisions which exclude, eliminate, restrict, reduce, limit,
delay, or in any other manner operate to qualify payment of the benefits described.

A description of policy provisions regarding renewability or continuation of coverage,
including age restrictions or the right to change premiums.

The Outline of Coverage form must state that the outline is not the insurance contract
(policy) itself. The policy itself sets forth in detail the rights and obligations of both the
insured and the insurer, therefore, it makes clear that the insured needs to read the
policy carefully when received!
Disability income protection coverage is designed to provide coverage for disabilities
resulting from a covered accident or sickness, subject to any limitations set forth in the
policy.
Accident only coverage is designed to provide coverage for losses resulting from an
accident only, subject to any limitations contained in the policy.
Specified disease and specified accident coverage is designed to provide restricted
coverage paying benefits only when certain losses occur as a result of specified diseases or
specified accidents.

All three of these policies, Disability Income Protection Coverage, Accident Only
Coverage, Specified Disease and Accident Coverage, must state in the outline of
coverage that coverage is not provided for basic hospital, basic medical-surgical, or
major-medical expenses.
b) Requirements for Replacements.... Application forms must include a question
designed to elicit information as to whether the insurance to be issued is intended to
replace any other disability insurance presently in force.
Upon determining that a sale will involve replacement, an insurer or its agent must furnish
the applicant, prior to issuance or delivery of the policy, a Notice To Applicant Regarding
Replacement. One copy of such notice will be retained by the applicant and an additional
copy signed by the applicant will be retained by the insurer.
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Notice To Applicant Regarding Replacement of Insurance Form (disclosure) :
1. "If you intend to lapse or terminate existing accident and sickness insurance and replace
it with a new policy, you should be aware of and seriously consider certain factors which
may affect the insurance protection available to you under the new policy."
2. "Health conditions which you may presently have may not be covered under the new
policy. This could result in denial or delay of a claim for benefits under the new policy,
whereas a similar claim might have been payable under your present policy."
3. "You may wish to secure the advice of your present insurer regarding the proposed
replacement of your policy. This is not only your right, but it is also in your best interest."
4. "If you still wish to terminate your present policy and replace it with new coverage,
failure to include all material medical information on an application may provide a basis for
the company to deny any future claims and to refund your premium as though your policy
had never been in force.
c) Standard Disclosure Form for Individual Fixed Benefit Policies
All insurers offering individual fixed payment hospital (i.e., $200 per day) and medical
benefits (i.e., $50 per visit) policies must issue a disclosure form in substantially the format
and content outlined below. The disclosure form must be provided to all applicants at the
time of solicitation and the application form for coverage must be completed.
The standard disclosure form for fixed payment policies must include:

This coverage is not comprehensive health care insurance and will not cover the cost
of most hospital and other medical services.

If you are also covered under a High Deductible Health Plan (HDHP) and are contributing
to a Health Savings Account (HSA), you should check to be sure that you will continue to
be eligible to contribute to the HSA.

This coverage is designed to pay you a fixed dollar amount regardless of the amount
that the provider charges. Payments are not based on a percentage of the provider's
charge and are paid in addition to any other health plan coverage you may have.

The benefits under this policy must be summarized: Type of coverage; Benefit amount;
Benefit trigger (identify any periods of no coverage such as eligibility or waiting periods);
Duration of coverage; and Renewability of coverage.

Policy provisions that exclude, eliminate, restrict, reduce, limit or delay payment of the
benefits described must be summarized and disclosed to the insured.
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2. The Washington Medicare Supplement Health Insurance Act
Purpose and Scope.....The purpose of this chapter is to supplement the requirements of the
Medicare Supplemental Health Insurance Act; to assure the orderly implementation and
conversion of Medicare supplement insurance benefits and premiums due to changes in the
federal Medicare program. It also provides for the reasonable simplification and
standardization of the coverage.
The scope of this chapter applies to every group and individual policy of disability insurance and
to every subscriber contract of an issuer that relates its benefits to Medicare, or designed
primarily as a supplement to reimbursements under Medicare.
Medicare Supplement (a.k.a. Medigap) policies are sold by insurance companies to pay for
what Medicare approves but does not pay. In general, Medicare pays benefits for:
hospitalization, medical (physician) services, hospice, outpatient prescription drugs (if you are
enrolled in Medicare Part D) and other approved items and services.
Laws and Rules Pertaining to Medicare Supplements:

Applicants must be at least 65 years of age and be covered under Part A and Part B of
Medicare.

An exclusion for pre-existing conditions is allowed for a maximum of three months
(90 days). A pre-existing condition is a condition for which medical advice was given or
treatment was recommended within three months before the date of coverage.
Note: No exclusions are permitted when replacing an in-force Medigap policy. Should
an in-force policy be replaced, a replacement form is required to be filled out, signed,
and the original left with the beneficiary.

Open enrollment guarantees that for six months immediately following enrollment in
Part B, persons age 65 and older cannot be denied Medigap insurance.

A beneficiary may not have two Medigap policies at once. Both state and federal laws
prohibit insurers from selling a Medicare supplement policy to a person that already has
a Medicare supplement policy except as a replacement.

A licensee or representative of an insurer or organization MAY NOT:
 complete the medical history portion of any form or application for the purchase of
such a policy (the medical history questions must be completed by the applicant,
applicant’s spouse, legal guardian, or physician).

knowingly sell a Medigap contract to any person who is receiving or applying for
Medicaid.

Policies must be guaranteed renewable and have a 31-day grace period.

A 30-day free-look (return of policy) period is required from the date the policy is
delivered to the beneficiary. This gives the beneficiary the right to return the policy for
a full refund.
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
Guarantee Issue.....Every issuer of a standardized Medicare supplement plan issued on
or after June 1, 2010, must issue, without evidence of insurability, coverage under a
2010 plan to any policyholder if the Medicare supplement policy replaces another
supplement plan issued prior to June 1, 2010.

Attained Age Rating Prohibited....The Commissioner has found it to be an unfair act and
a prohibited practice for any issuer to use the increasing age of an insured as the basis
for increasing premiums on a Medicare supplement policy. The rating practice
commonly referred to as "attained age rating" is prohibited.

A Medicare supplement policy MAY NOT use waivers to exclude, limit, or reduce
coverage or benefits for specifically named or described preexisting diseases or physical
conditions (e.g., no permanent exclusions, impairment riders, rate-up or surcharges).

A Medicare supplement policy MAY NOT be issued or renewed with benefits for
outpatient prescription drugs. Prescription drugs are covered under Medicare Part D.
Medicare Supplement Outline of Coverage: Issuers must provide an outline of
coverage to all applicants at the time of application and must obtain an acknowledgment of
receipt of the outline from the applicant. If the supplement policy is issued differently than
how it was applied for, a substitute outline of coverage must accompany the policy.
Disclosure:
1) Any disability or health insurance policy (other than a Medicare Supplement policy) that
provides coverage to a person who is eligible for Medicare must disclose to that person:
 "This policy is not a Medicare supplement policy. If you are eligible for Medicare,
review the Guide to Health Insurance for People with Medicare available from the
company." The notice must be attached to the first page of the outline of coverage.
 Delivery of this "Guide" (sometimes called a Buyer's Guide) must be made to the
applicant at the time of application and acknowledgement of receipt of the guide
must be obtained by the issuer.
2) An Application for the purchase of a disability or medical insurance policy (other than a
Medicare Supplement policy) that is provided to persons eligible for Medicare must disclose
the extent to which the policy duplicates Medicare.
 Both federal and state laws prohibit the sale of a health insurance policy that
duplicates Medicare benefits unless it will pay benefits without regard to other
disability or other health coverage and it includes the prescribed disclosure
statement on the application.
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3. The Long-Term Care Insurance Act
Definitions
"Certificate" or "Certificate of Insurance" includes any certificate issued under a group longterm care insurance policy that has been delivered or issued for delivery in this state.
"Issuer" includes insurance companies, fraternal benefit societies, health care service
contractors, health maintenance organizations, or other entity delivering or issuing for delivery
any long-term care insurance policy, contract, or rider.
"Long-term care insurance" means an insurance policy, contract, or rider that is advertised,
marketed, offered, or designed to provide coverage for at least twelve consecutive months.
 Long-term care insurance may be on an expense incurred basis (pays only what the
covered expenses to the insured are) or an indemnity basis (set dollar amount to the
insured regardless of what the expenses are), for medically necessary services.
 Long-term care insurance includes any policy, contract, or rider that provides for
payment of benefits based upon cognitive impairment or the loss of functional
capacity.
 Long-term care insurance includes group and individual annuities and life insurance
policies or riders that provide long-term care insurance.
Long-term care insurance does not include any insurance policy, or rider that is offered
primarily to provide coverage for basic medicare supplement, basic hospital or basic surgical
expense, major medical expense, disability income, accident only, specified disease, or limited
benefit health.
"Policy" includes a document such as an insurance policy, contract, subscriber agreement, rider,
or endorsement delivered or issued in this state by an insurance company or any similar entity
authorized by the insurance commissioner to transact the business of long-term care insurance.
"Qualified long-term care insurance contract" or "federally tax-qualified long-term care
insurance contract" means an individual or group insurance contract that meets the
requirements of the Health Insurance Portability and Accountability Act and section of the
internal revenue code of 1986.
Education Requirement....Producers engaged in the transaction of long-term care
insurance are currently required to take a special approved eight-hour (8) LTC course.
 After the first course, a four-hour refresher course per license renewal is required.
 The approved LTC courses count towards the required twenty-four hours of continuing
education for renewal of licenses.
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4. Health Care False Claims Act....It is recognized that fraudulent health care claims
contribute to increases in health care costs. In recognition of this, special attention has been
directed at eliminating false and fraudulent claims by establishing specific penalties and
deterrents.

No person may present a false or fraudulent claim under a contract of insurance. This
includes preparing false or fraudulent proof of loss with the intent that it be used in
support of such a claim.

No person may obtain a health care payment in an amount greater than that to which
the person is entitled.

This law does not apply to statements made on an application for coverage under an
insurance contract or certificate of health care coverage.

A violation of this section is a class C felony. Each claim that violates this section will
constitute a separate violation.
5. Application Completion.....If any insurer intends to rely on an applicant's or enrollee's
answers to health questions in an application to determine eligibility for coverage or the
existence of a preexisting condition, such questions must be clear and precise. Simply asking
whether the applicant has been under the care of a physician during the preceding year, for
example, is not sufficient to require a "yes" answer where the applicant has been using
medications that were prescribed prior to the start of the preceding year and the applicant has
not seen a physician for more than a year.
6. Policy Delivery.....requires that policies be delivered within a reasonable period of time
after issuance. If an insurer relies upon its appointed insurance producers to make deliveries of
its policies, the insurer, as well as the appointed insurance producer, is responsible for any
delay resulting from the failure of the appointed insurance producer to act diligently.

Insurance producers delivering insurance policies to an insured must make an actual
physical delivery. It is not acceptable for an insurance producer to merely obtain a
receipt indicating a delivery and then to retain the policy, for safekeeping or otherwise,
in the producer's possession.

Insurance producers may obtain policies from owners or the insured and hold such
policies briefly for analysis or servicing, giving a receipt in every instance, but must
promptly return any such policies to their owners or the insured.

Violation is an unfair practice and unfair competition and a violation of this section is
prohibited and will subject an insurer and insurance producer to the penalties set forth
by the Commissioner.
32
B. Health Insurance Reform Act....It is the intent of the legislature to ensure that all
enrollees in managed care settings have access to adequate information regarding health care
services covered by health carriers' health plans, and provided by health care providers and
health care facilities. It is only through such disclosure that Washington state citizens can be
fully informed as to the extent of health insurance coverage, availability of health care service
options, and necessary treatment.
Definitions ....(PLEASE NOTE: Students should be familiar with the following definitions but will
not need to memorize them for the state exam.)
1. "Adjusted Community Rate" means the rating method used to establish the premium for
health plans adjusted to reflect actuarially demonstrated differences in costs attributable to
geographic region, age, family size, and use of wellness activities.
2. "Basic Health Plan of Washington" means the system of enrollment and payment for basic
health care services, administered by the plan administrator through participating managed
health care systems.
3. "Basic Health Plan Subsidy" means the amount of premium the administrator makes to the
health care provider on behalf of the subsidized enrollee. An employer may pay the
premium on behalf of the subsidized or nonsubsidized enrollee.

The powers, duties and functions of the Washington basic health plan is the
responsibility of the Washington state health care authority. All references to the
administrator mean the Washington state health care authority.
4. "Basic Health Plan Services" means that schedule of covered health services, including the
description of how those benefits are to be administered, that are required to be delivered
to an enrollee under the basic health plan, as revised from time to time.
5. "Catastrophic Health Plan" means:
 In the case of a policy covering a single enrollee, a health benefit plan requiring a
calendar year deductible of, at a minimum $1,750 and an annual out-of-pocket
expense required to be paid for covered benefits of at least $3,500, both amounts to
be adjusted annually by the Commissioner; and
 In the case of a policy covering more than one enrollee, a health benefit plan
requiring a calendar year deductible of, at a minimum $3,500 and an annual out-ofpocket expense required to be paid under the plan for covered benefits of at least
$6,000, both amounts to be adjusted annually by the Commissioner.
6. "Certification" means a determination by a review organization that an admission, extension
of stay, or other health care service has been reviewed and, based on the information
provided, meets the clinical requirements for medical necessity, appropriateness, level of
care, or effectiveness under the auspices of the applicable health benefit plan.
7. "Concurrent Review" means utilization review conducted during a patient's hospital stay or
course of treatment.
8. "Covered Person" or "Enrollee" means a person covered by a health plan including an
enrollee, subscriber, policyholder or beneficiary of a group plan.
33
9. "Dependent" means, at a minimum, the enrollee's legal spouse and unmarried dependent
children who qualify for coverage under the enrollee's health benefit plan.
10. "Emergency Medical Condition" means the onset of a symptom, including severe pain, that
would lead a prudent layperson acting reasonably to believe that a health condition exists
that requires immediate medical attention.
11. "Emergency Services" means covered health care services medically necessary to evaluate
and treat an emergency medical condition, provided in a hospital emergency room.
12. "Enrollee Point-of-Service Cost-Sharing" means amounts paid to health carriers directly
providing services, health care providers, or health care facilities by enrollees and may
include copayments, coinsurance, or deductibles.
13. "Grievance" means a written complaint submitted by a covered person regarding:
denial of payment for medical services or service delivery issues, including dissatisfaction
with medical care, waiting time for medical services, provider or staff attitude.
14. "Health Care Facility" or "Facility" means hospices, hospitals, rural health care facilities,
psychiatric hospitals, nursing homes, community mental health centers, kidney disease
treatment centers, ambulatory diagnostic, treatment, or surgical facilities. It also includes
drug and alcohol treatment facilities and home health agencies.
15. "Health Care Provider" means a person licensed to practice health or health-related
services in this state consistent with state law; or an employee or agent of a person acting
in the course and scope of his or her employment.
16. "Health Care Service" means that service offered or provided by health care facilities and
providers relating to the prevention, cure, or treatment of illness, injury, or disease.
17. "Health Benefit Plan" means any policy offered by a health carrier to provide, reimburse,
or pay for health care services. It DOES NOT INCLUDE long-term care insurance, Medicare
supplemental insurance, disability income, property or casualty insurance policies, dental
only coverage, employer-sponsored self-funded health plans, and vision only coverage.
18. "Material Modification" means a change in the actuarial value of the health plan as
modified by more than five percent but less than fifteen percent.
19. "Preexisting Condition" means any medical condition, illness, or injury that existed any
time prior to the effective date of coverage.
20. "Premium" means all sums charged, received, or deposited by a health carrier as
consideration for a health plan or the continuance of a health plan.
21. Review Organization means an insurer or health organization affiliated with, under
contract with, or acting on behalf of a health carrier to perform a utilization review.
22. "Utilization Review" means the assessment of the necessity and appropriateness of the
allocation of health care resources and services of a provider or facility.
34
23. "Wellness Activity" means an explicit program of an activity consistent with health
guidelines, such as, smoking cessation, injury and accident prevention, reduction of alcohol
misuse, weight reduction, exercise and nutrition education.
24. A "Small Group" is defined as any person, firm, corporation, partnership, association, sole
proprietor or self-employed individual that is actively engaged in business that has
employed at least one (1) person but has no more than fifty (50) employees. To ensure
that a business is bona fide, the law requires people or the business to show that:

they have been employed by or have operated the same business for at least the
last twelve months and

they have made at least 75 percent of their income from the business or trade
 FYI: Similar changes to federal law have been approved by Congress and signed by
the president, but don't take effect until 2014.
Requirements Under Health Reform:
1. Individual Health Plans....Exclusion of Preexisting Conditions

Under an individual health benefit plan, a waiting or exclusion period for a preexisting
condition can be no more than nine months. A preexisting condition is a condition for
which medical advice was given, recommended or treated by a health care provider
within six months prior to the effective date of the plan.

No health insurance carrier may impose a waiting period or exclusion for any preexisting
condition for an individual who is eligible under the federal HIPAA portability law.

Individual health benefit plan preexisting condition waiting periods may not apply to
prenatal care services.
2. Group Health Plans....Exclusion of Preexisting Conditions

If the applicant had coverage under a health plan 90 days (3 months) before the date of
application for the new group plan, and such coverage was similar and continuous for
at least three months, then the carrier may not impose a waiting period for coverage of
preexisting conditions under the new health plan.

This Washington law regarding excluding an individual's preexisting condition, under
group health plans, is better for the consumer than the Federal HIPAA guidelines!
3. Individual Health Benefit Plans....Mandatory Benefits: All individual health benefit plans,
other than catastrophic health plans, must include benefits for:

Maternity services that include diagnosis of pregnancy, prenatal care, delivery, care for
complications of pregnancy, physician services, hospital services, operating rooms, etc.

Prescription drug benefits of at least a $2,000 benefit payable by the carrier annually.
35
4. Standard Health Questionnaire....A health carrier may require any person applying for an
individual health benefit plan to complete the standard health questionnaire.

Exemption: If a person is seeking an individual health benefit plan or enrollment in the
basic health plan due to his change of residence from one geographic area in
Washington state to another geographic area in Washington where his current health
plan is not offered, completion of the health questionnaire will not be required for
coverage. The application for coverage must be made within ninety days of relocation.
5. Maternity Services....Coverage must permit the attending provider, in consultation with the
mother, to make decisions on the length of inpatient stay, rather than making such decisions
through contracts or agreements between providers, hospitals, and insurers. These decisions
must be based on accepted medical practice.

Coverage for the newly born child must be no less than the coverage of the child's
mother. Adopted children are treated the same as newborns.
6. Patient Bill of Rights....It is the purpose or intent of the legislature that enrollees covered by
health plans receive quality health care designed to maintain and improve their health. The
purpose is to ensure that health plan enrollees:






Have improved access to information regarding their health plans
Have sufficient and timely access to health services, and choice among health providers
Are assured that health care decisions are made by appropriate medical personnel
Have access to a quick and impartial process for appealing plan decisions
Are protected from unnecessary invasions of health care privacy
Are assured that personal health care information will be used only as necessary to
obtain and pay for health care or to improve the quality of care
The Commissioner will adopt rules and standards for this section after considering relevant
standards adopted by national managed care accreditation organizations and state agencies
that purchase managed health care services. The following are requirements for health care
providers:
1) Protect Enrollee's Right to Privacy or Confidential Services
2) Health Plan Information must include:

A listing of covered benefits, including prescription drug benefits, if any, a copy of the
current formulary, if any is used, definitions of terms such as generic versus brand
name, and policies regarding coverage of drugs, such as how they become approved,
and how consumers may be involved in decisions about benefits

A listing of exclusions, reductions, and limitations to covered benefits, and any definition
of medical necessity criteria upon which they may be based

A statement of the carrier's policies for protecting the confidentiality of health
information; the cost of premiums and any enrollee cost-sharing requirements; and a
summary explanation of the carrier's grievance process
36
3) Access to Appropriate Health Services - Enrollee Options….. Each carrier must allow an
enrollee to choose a primary care provider who is accepting new enrollees from a list of
participating providers. Enrollees also must be permitted to change primary care providers
at any time. Each carrier must provide enrollees with direct access to the participating
chiropractor of the enrollee's choice for covered chiropractic health care.
4) Enrollment of a child participating in a medical assistance program....(Employersponsored health plan): When the health care authority has determined that it is costeffective to enroll a child participating in a medical assistance program in an employersponsored health plan, the carrier must permit the enrollment of the participant without
regard to any open enrollment restrictions.
5) Carriers that offer a health plan will maintain a documented utilization review program
description and written utilization review criteria based on medical evidence.
6) Prohibition against retrospective denial of health plan coverage.....A health carrier that
offers a health plan will not retrospectively deny coverage for emergency and
nonemergency care that had prior authorization under the plan's written policies at the
time the care was rendered.
7) Requirement for Carriers to Have a Comprehensive Grievance Process..… Each carrier
must implement procedures for registering and responding to complaints in a timely and
thorough manner. Each carrier must provide written notice to an enrollee and the
enrollee's provider of its decision to deny, modify or terminate payment of health care
services or benefits, including the admission to or continued stay in a health care facility.
8) Independent Review of Health Care Disputes..... There is a need for a process for the fair
consideration of disputes relating to decisions by carriers that offer a health plan to deny,
modify, reduce, or terminate coverage of or payment for health care services for an
enrollee. An enrollee may seek review by a certified independent review organization of a
carrier's decision to deny, reduce or terminate coverage or payment for health service.
9) Any carrier that offers a health plan or dental coverage plan will designate a medical
director who is properly licensed under Washington Law.
10) A health carrier must adhere to the accepted standard of care under the law when
arranging for the provision of medically necessary health care services to its enrollees. A
health carrier will be liable for any harm caused by its failure to follow that standard of care
when the failure resulted in the denial or delay of the health care service.
11) Delegation of Duties - Carrier Accountability.....Each carrier is accountable for and
must oversee any activities that it delegates to any subcontractor. No contract with a
subcontractor executed by the health carrier or the subcontractor may relieve the health
carrier of its obligations to any enrollee for the provision of health care services.
37
C. Standardization and Minimum Standards of Benefits….The Commissioner will
issue regulations to establish minimum standards for benefits under each of the following
categories of coverage in individual policies of disability insurance, including but not limited to:
Basic hospital-medical-surgical expense coverage
Hospital confinement indemnity coverage
Major medical expense coverage
Disability income protection coverage
Accident only coverage
1. Proof of Notice…..If any notice is mailed to an insured, the insurance company is not
required to prove that the insured actually received the notice. It is required to prove only
that the notice was mailed to the insured at the last known address.

When a notice to cancel, deny, or refuse to renew insurance is mailed to an
insured, the notice must give the actual reason for the notice in clear and simple
language. It is not sufficient to state that an insured "does not meet the
company's underwriting standards. The reason why the individual does not meet
such underwriting standards is what must be given.
2. Free Look……This provision gives the owner a minimum of 10 days to look at the
policy from the date the policy is delivered to the owner. This provision gives the owner
the right to return the policy for a full refund. The insurance company has 30 days to
refund the paid premiums or pay an additional 10% penalty to the insured.
3. Nonrenewal and Cancellation.....No insurer may refuse to renew an individual
disability policy because of a change in the physical or mental health of any insured person.
An individual disability policy may not be cancelled by the insurance company except for
nonpayment of premiums or fraud committed by an insured (such as filing a false claim).

This does not affect the right of the insurance company to increase rates
(premiums). With the permission of the insurance commissioner, a rate increase
must be on a classification basis, not on an individual basis.
4. Cancellation means that a policy will be terminated prior to the renewal date of that
policy. The insured may cancel a policy at any time by written notice delivered or mailed to
the insurance company.

If the insured cancels, the refund of premium will be computed on a short-rate
basis, meaning unearned premiums minus a service fee charged by the insurance
company.

If the insurance company cancels, the refund of premium will be computed on a
pro rata basis, meaning all unearned premiums will be refunded and no service fee
is allowed to be charged by the insurance company.

The cancellation of a policy will not prejudice any claim originating prior to the
effective date of cancellation.
38
D. HCSCs and HMOs
1. A Grievance Process is required for the fair consideration of disputes relating to
decisions by carriers that offer a health plan to deny, modify, reduce, or terminate coverage
of or payment for health care services for an enrollee.
An enrollee may seek review by a certified independent review organization of a carrier's
decision to deny, modify, reduce, or terminate coverage of or payment for a health care
service, after exhausting the carrier's grievance process and receiving a decision that is
unfavorable to the enrollee.
2. Definitions:
"Health care service contractor" means any corporation, cooperative group or association
which is sponsored by or connected with a provider or group of providers who accepts
consideration (premium payment) for providing such persons with any health care services.
"Health care services" means and includes medical, surgical, dental, chiropractic, hospital,
optometric, podiatric, pharmaceutical, ambulance, custodial, mental health, and other
therapeutic services.
"Participating provider" means a provider who has contracted in writing with a health care
service contractor to accept payment from such contractor for any health care services
rendered to a person.
"Health maintenance organization" means any organization receiving a certificate of
registration by the Commissioner which provides comprehensive health care services to
enrolled participants on a per capita prepayment basis or on a prepaid individual practice
plan, except for an enrolled participant's responsibility for copayments.
3. Chemical Dependency Benefits……Each group contract that is delivered or issued
must contain provisions providing benefits for the treatment of chemical dependency
(includes alcohol) to covered persons. Treatment must be in an “approved treatment facility.”
An approved treatment facility program means a program certified by the Department of
Social and Health Services as meeting standards adopted under Washington law.
Chemical Dependency means an illness characterized by a physiological or psychological
dependency, or both, on a controlled substance and/or alcoholic beverages.
For 2013, the minimum benefits payable for alcohol and chemical dependency treatment,
exclusive of all cost sharing amounts, in any consecutive twenty-four-month period, must not
be less than $16,500. Each succeeding year the benefit must increase in increments of not less
than five hundred dollars for new and renewing contracts.
39
4. Conversion/Continuation Rights
a) Individual disability insurance policies must provide that the covered spouse and/or
dependents may continue the coverage under a new policy, without evidence of
insurability, if they cease to be a family member because of divorce or death of the
insured, or the child reaches the limiting age (currently age 26).

To obtain the conversion policy, a person must submit a written application and the
first premium payment not later than 31 days after the date the person’s coverage
ends. The conversion policy will become effective, without lapse of coverage,
following termination of coverage under the previous policy.

The insurer determines the premium for the conversion policy in accordance with
the insurer’s table of premium rates applicable to the age and class of risk of each
person to be covered under the policy, and the type and amount of benefits.
b) Dependent Children…..Handicapped children may not be removed from the
parents' policy. Proof of incapacity for continuance of benefits for such dependents
must be given within 31 days from when the dependent reaches the limiting age. The
insurer may require proof anytime for the first two years and once per year after that.

The dependent must be incapable of self-sustaining employment and chiefly
dependent upon the parents for support and maintenance.
5. Newborns are covered at birth on all individual and group disability insurance policies.
The insured must pay the premium and fill out the necessary forms within 60 days of birth.

Adopted children are treated the same as newborns.
E. Health Insurance Coverage Access Act (a.k.a. Washington Health Pool)..... Anyone
who is a resident in the State of Washington and can show evidence that they have been
denied, rated-up, surcharged, or had benefits limited on a health insurance policy (including
Medigap) may enroll in the Washington Health Pool. The following apply to the health pool:
 Major Medical coverage; 80-20% co-insurance after the deductible. Deductibles of
five hundred dollars ($500) and one thousand dollars $1,000) on a per person per
calendar year basis must initially be offered. The board may authorize deductibles in
other amounts. There are also per individual and family out-of-pocket maximums.
 Double (duplicate) coverage prohibited..…The pool may not issue a pool policy to
any individual who already has coverage or who would be eligible for such coverage
if he or she elected to obtain it at a lesser premium.

Dependent coverage..…Coverage is applicable to children of the insured including
adopted and newborn children. However, duplicate coverage is prohibited.
 Medicare supplement policies also may be offered to persons receiving Medicare
Parts A and Part B.
40
DEPARTMENT OF INSURANCE
Voters
Put the Commissioner into office.
4 years
Commissioner’s term of office.
5 years
Examination of insurance companies.
90 days
Time for a producer to request a hearing or make an appeal.
30 days
Time for the Commissioner to hold a hearing after request by a producer.
$25,000
Bond required of the Commissioner before taking office.
LICENSING
1 year
Time to pass the pre licensing exam after education certification is issued.
180 days
Time to secure a producer’s license after passing the pre licensing exam.
180 days
Maximum duration of a temporary license.
Broker
Producer who represents the consumer/insured.
Agent
Producer who represents the insurance company they sell insurance for.
Public's
Producer always serves whose best interest?
2 years
Term of a producer’s appointment and license.
Birthday
When a producer’s license expires.
24 hours
Continuing Education hours needed to renew a producer’s license.
3 hours
Continuing Education hours needed in ethics to renew a producer’s license.
3 years
Time for licensee to keep certificate of completions.
$2,500
Minimum bond needed for a producer to act as a broker.
Every July 1st
18
When a Certificate of Authority renews for insurance companies.
60 days
Youngest age allowed to be licensed as a producer.
After ___ from the expiration date of a producer’s license, all associated appointments and
affiliations are terminated.
1 year
After ____ from the expiration date of a producer’s license the producer will have to begin
the entire licensing process again.
41
PENALTIES AND FINES
$1,000
Commissioner’s maximum fine per violation of the insurance code.
$25,000
Civil penalty for transacting insurance without an insurance license.
1 year
15 to 30 days
Maximum duration of license suspension or revocation.
Days for a producer to pay a fine.
15 days
The time for notifying a producer to suspend, revoke or refuse to renew his or her license.
3 days
The time for notifying a producer to suspend a license under an emergency action.
MISCELLANEOUS
30 days
A change of any address must be reported within ____ to the Commissioner.
10 days
Time for an insurer to acknowledge notice of claim to the claimant.
30 days
Time after insurer receives a claim to complete a claim investigation.
Anytime
Time the Commissioner’s office can audit a company’s records.
$25
Maximum value of gift or service allowed to be given to an insured or prospective insured.
5 years
Time for a producer to keep insurance transaction records.
15 days
Time for a producer to respond to the Commissioner when an inquiry is made.
$500,000
Coverage limit per policy for Life & Disability under the Guaranty Association.
$300,000
Coverage limit for Property & Casualty per claim under the Guaranty Association.
42
WASHINGTON LAWS THAT PERTAIN TO DISABILITY INSURANCE
90 days
6 months
Days a pre existing condition may be excluded from coverage under Medigap insurance.
Medigap open enrollment period after enrolling in Part B of Medicare.
31 days
Medicare Supplement grace period.
30 days
Medicare Supplement free look.
1 year
Minimum benefit period for a Long-Term Care Insurance policy.
Producers engaged in the transaction of long-term care insurance are currently required to
take a special continuing education course of _____ hours.
8 hour
Birth
Class C
Felony
When newborns are covered under health care coverage.
Violation of the WA Health Care False Claims Act
one person
A minimum of ____ is needed to form a small group. WA Health Reform
50 people
Maximum of ____ are allowed to form a small group. WA Health Reform
10
9 months
$2,000
90
Minimum days for consumer’s free look at issued disability contract.
Maximum period a pre existing condition can be excluded for individual health insurance.
Minimum prescription coverage under individual health insurance.
Group plans may not exclude a pre existing condition if an individual had previous coverage
within _____ days from the application date of the new coverage.
DISABILITY UNIFORM PROVISIONS
2 years
Contestability period of a policy.
7 days
Minimum grace period for weekly premium payment plans.
10 days
Minimum grace period for monthly premium payment plans.
31 days
Minimum grace period for quarterly, semi-annual and annual premium payment plans.
20 days
Notice of claim period for consumer.
15 days
Time to send out claim form by insurer.
90 days
Time for insured/consumer to send in proper proof of loss.
30 days
Loss of time or disability income benefits must be paid at least every ____.
60 days
May not sue the insurance company for ____ after filing a proof of loss.
3 years
Statute of limitations for suing an insurance company after filing a proof of loss.
43

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